On January 14, 2011, the Internal Revenue Service ("IRS") issued Notice 2011-9 (the "Notice"), which extended the filing date for reporting on Form 8947 a covered entity's 2009 sales of branded prescription drugs under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act" or the "ACA"). The filing date for Form 8947 with respect to 2009 sales of branded prescription drugs was extended from January 20, 2011 to February 11, 2011. In addition, in response to numerous comments received by the IRS, the Notice made certain changes to Notice 2010-71, 2010-50 IRB (the "Initial Notice"), primarily with respect to the information requested from covered entities.
On November 29, 2010, the IRS issued the Initial Notice, which provided guidance on the calculation of the annual fee imposed on certain manufacturers and importers of branded prescription drugs for calendar years beginning after December 31, 2010. For a detailed description of the Initial Notice, including the definitions of "branded prescription drugs," "covered entity," "Sales Year" and "Fee Year," see Reed Smith's Tax Alert 2010-278.
The Initial Notice provided that all covered entities are required to file IRS Form 8947, Report of Branded Prescription Drug Information, with the IRS by December 15 of each year, setting forth data with respect to the immediately preceding Sales Year, unless an alternative date is prescribed in the form or instructions. The Initial Notice stated that, for the 2011 Fee Year, (i) the Form 8947 (which will provide data for the 2009 Sales Year) must be submitted to the IRS by January 20, 2011; (ii) the IRS will calculate the preliminary fee and will send to each covered entity notification of its preliminary fee calculation by May 2, 2011; and (iii) the final fee calculation will be sent to each covered entity by August 15, 2011, with payment due no later than September 30, 2011.
Modifications Made to the Initial Notice
The Notice modifies, restates and supersedes the Initial Notice. Substantively, the Notice makes the following changes to the section of the Initial Notice entitled "Information Requested from Covered Entities":
- Clarifies that the information requested on Form 8947 is only for those members of a controlled group that are manufacturers and importers with gross receipts from the sale of branded prescription drugs to specified government programs (or sales due to coverage under the programs).
- Modifies which orphan drugs may be reported on Form 8947. These orphan drugs are excluded from branded prescription drug sales under section 9008(e)(3) of the ACA. The Notice states that, for purposes of section 9008(e)(3) of the ACA, the credit is considered "allowed" for a drug if any person claimed the orphan drug credit under section 45C of the Internal Revenue Code. Thus, the section 45C credit is considered allowed if any entity claimed the credit, even if that entity was not the covered entity (or a member of the covered entity's controlled group) at the time the credit was claimed. The IRS had received numerous comments that the restrictive interpretation of the section 9008(e)(3) exclusion for orphan drugs set forth in the Initial Notice (i.e., that a covered entity was only entitled to the exclusion if it had taken the section 45C credit) was contrary to the statute.